1. Growth in the 1990s: Pleasant and Unpleasant Surprises
Presentation to ICRIER
September 28, 2004
9/11/2018

2. Five disappointments
Length, depth, and variance in the “transition recession” in the FSU/EE countries
Severity and intensity of the financial crises
Argentina’s implosion
Weakness of the response to reform, particularly in Latin America
Continued stagnation in Sub-Saharan Africa
9/11/2018

3. How long? How Deep? 9/11/2018 Output Depth Duration Beginning Time
Of transition
Duration
Depth
Output
9/11/2018

4. Deep, long, and variable
9/11/2018

5. Markets miss the mark on East Asia
9/11/2018

6. Collapse of convertibility in Argentina
The Mexican debt crisis marked the end of one era, the Argentina crisis perhaps the end of another
The severity given the collapse was not a surprise—it was design.
What was surprising was that it collapsed in spite of every attempt to “pre-commit”
9/11/2018

7. Growth came, but did not stay in Latin America, despite steady reform progress
9/11/2018

8. The predicted “renaissance” in Africa recedes into the future…
While there are brief episodes of growth in some SSA countries, there is no “locomotive” to pull the rest along.
This is a disappointment, but a surprise?
9/11/2018

9. Growth in the 1990s: A Mixed Record (divergence “big time”)
Lessons from the 1990s
Growth in the 1990s: A Mixed Record (divergence “big time”)
EAP
SAR
OECD
LAC
MNA
AFR
ECA
9/11/2018

10. Four pleasant surprises
Strong growth in the India, China, and Vietnam.
Robust progress in social indicators, in spite of low growth in many countries
Resilience of the world economy to stresses
Bright spots of continued growth
9/11/2018

11. Coal to Newcastle: Growth rates in India (per capita, PPP)
9/11/2018

12. The star performers in growth are middle of the pack in many indicators
Rank in:
Control of corruption
Regulatory quality
Growth
China 63 94 3
Vietnam
105
135 4
India 86
101 14
Out of N:
151
180
136
9/11/2018

13. Brazil has slow growth but substantial progress on enrollments—especially of the poor
9/11/2018

14. A pleasant surprise: the sky did not fall
I would say the biggest misjudgment that I can remember making…was the sense of profound pessimism about Russian economic reform that I had in the fall of 1998, and that if you had said that by 2003, they would be issuing Eurobonds at300 basis points spreads, I would have thought that its was absolute madness.
Lawrence Summers, in Practitioners in Development
9/11/2018

15. Continued growth, in spurts
The 1990s did see rapid growth in a number of countries…
Dominican Republic
Uganda
Poland
Chile
9/11/2018

16. What did we learn about growth?
Growth is enormously volatile over the medium run—with many booms and busts—little growth persistence
The “symptoms and syndromes” emerge from growth regressions
Centrality of “institutions”
9/11/2018

17. Growth is not steady, but is a series of episodes…
9/11/2018

18. And from millions of growth regressions? Syndromes
Symptoms
Excessive
Generalization
Bad Governance
Corruption, instability
“democracy is good/bad for growth”
Macroeconomic
Instability
High and variable inflation
“Reducing deficits will increase growth”
External policy
Inability to finance needed imports
“Tariff reductions will raise growth”
Financial sector
Low savings rates
“Privatization of banks will raise growth”
Bad Luck
Terms of trade shocks
“Resource exporters will have slow growth”
9/11/2018

19. “Institutions” are central
The first, overwhelming lessons we learned in the 1990s, is the transcendent importance of the quality of institutions and the closely related question of the efficacy of the administration. Well- executed policies that are 30 percent off are much more effective than poorly executed policies that are spot on.
Lawrence Summers, Practitioners in Development
9/11/2018